The fact that the price of gold has been increasing exponentially over the past 12 years is obvious in the graphs below. For those of you who may not be familiar with a 'logarithmic axis', just remember that when data is plotted on a logarithmic y-axis, if the data is following an exponential function then it appears as a straight line. Indeed, the price of gold follows this exact profile.

The particular exponential function that measures the price of gold over the past 12 years has a R-squared value of .9816, meaning that the price of gold is 98% correlated to the exponential function (an R-squared value of 1.000 is a perfect exponential function).

As the charts make clear, there has been nothing in the past 12 years (certainly not the drop from 1900$ to 1500$ in recent months) that shows the slightest indication that gold has changed it's long-term trend.

Extrapolating this function forward in time shows that the price of gold will hit $5000 in 2018/early 2019, $10,000 in 2022, and $17,500 in 2026.

Want to triple your nominal net worth in 6 years or less? Buy gold.
Want a ten-bagger in just 14 years or less? Buy gold.


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Nice post Some_Math_Guy!

Perhaps another way to describe the logarithmic function (in this particular case) is that it changes a curve into an ARROW...and we can all see where it's pointing!

What really surprises me is how closely the actual price of gold follows an exponential curve. The correlation coeffecient is .98, and as Chris Martenson has said, as a scientist when you see a .70 correlation, you have probably discovered something interesting, and at .80 you are really onto something. At .90, you start to suspect that the data has been faked.

A correlation of .98 is pretty much a perfect predictor, and nothing (not even the dramatic price drop in 2008) has broken outside of that trend in the past 12 years. It's amazing that such a mathematically-inevitable outcome can exist, yet so few people have yet gotten on the right side of the greatest trade in history.

Just print out the graph and stick it on the wall, so the next time you buy gold you can take comfort in where things are going


Jeff Nielson wrote:
Nice post Some_Math_Guy!

Perhaps another way to describe the logarithmic function (in this particular case) is that it changes a curve into an ARROW...and we can all see where it's pointing!

Where did this chart come from? Did math guy come up with it? I am more than deeply suspicious of TA's. Reminds me of Franklin Sanders and his charts.

C'mon Seb! As we always say around here, SKEPTICISM is a necessary virtue for us all to possess. However, we work very hard to make this a place where readers do not need to be SUSPICIOUS about what is posted on our forum - and elsewhere.

I have made a point of raising doubts MYSELF - even with respect to material which is in agreement with my own general position - anytime and every time that such data raises evidentiary issues.

In this respect, I would less-than-humbly suggest that my economics training, my legal training, and my own innately contrarian nature (lol) make me one of the people who is most adept at dissecting flaws in analysis.

As Some_Math_Guy stated, the numbers speak for themselves, and I have absolutely no reason to regard those charts with any degree of suspicion. It is (as Some_Math_Guy points out) that plotting data in logarithmic form will transform an exponential mathematical function into (roughly) a straight line.

What are you questioning here? That the price of gold and/or the money-printing has been going up exponentially? We say that here EVERY DAY. It is FACT.

There is no one on this site more resistant to T/A than myself (lol). So when something makes it past my own "smell test", you can place considerable confidence in the legitimacy of that statistical analysis.

OK Jeff, if you say so. I'm hoping your $3000.00 prediction for end of 2012 will be correct. The last 6 months have been very disappointing.

What is your take on this then? Apologies if someone has already posted it.

www.forbes.com/sites/greatspeculations/2...oomsday-never-comes/

Forbes is the same magazine that recently produced this gem:

www.forbes.com/sites/schifrin/2012/01/04...ment-ideas-for-2012/

Their outstanding investment ideas for 2012 include

Treasury Bonds (the biggest bubble in history, interest rates at all-time lows and have no possible place to go except up, which would absolutely crush bond prices)

Big Box retailers (consumer spending is on life-support, retail margins are shrinking due to massive inflation...even WalMart is saying that they are't seeing consumers coming back in this 'Recovery')

Research in Motion (produces poor products, does not innovate, has been hemorrhaging market share to Android phones at an unbelievable rate with no credible plan to stem the bleeding)

Intel (ostensibly because Warren Buffett recently bought it along with his other faves like the failing Bank of America. Berkshire Hathaway is down roughly 80% in terms of Buffet's 'useless' gold over the past decade)

Some random funeral company (I concede that if we have war with Iran or martial law in America, it might outperform. I'll put it on my watch list LOL)

Forbes is better known among educated investors as a whore for the financial industry, which does nothing more than efficiently transfer wealth from the middle class to the wealthy.

Seb,

I want to be your friend. I can't match your education.

So, lets find a common ground.

You like to run. I always looked at running as a marathon.
You want to win. A competitor, humble person and I think a great person.

I personally can't afford to buy gold, so I have a long holding on some gold stocks.
Taken a bit of a bruise lately, to be honest.

You know right from wrong, so don't fester on temporary dis-illusion.

My Godfather had polio, got it six weeks before the vaccine. He became a doctor.

My point to you is, as my Godfather asked me after a basketball injury, "wanna trade places for a day?"

"Nervous tension, mans invention is the biggest waste of human energy, let the tension out or it will build and that would be a tragedy"- Ray Davies

Earl

Seb1 wrote:
OK Jeff, if you say so. I'm hoping your $3000.00 prediction for end of 2012 will be correct. The last 6 months have been very disappointing.

What is your take on this then? Apologies if someone has already posted it.

www.forbes.com/sites/greatspeculations/2...oomsday-never-comes/

There was some vintage COMEDY in that piece, but not much respectable analysis. Let's start with the title:

"Doomsday Never Comes..."

Obviously what immediately come to mind is the joke I've used on a number of occasions of the man who jumps off the roof of a 100-storey building, and is heard to remark as he whizzes past an open window on the 50th floor "So far, so good...!"

As for the rest of that nonsense, we're supposed to be FRIGHTENED AWAY from gold and silver because in the last two big runs most of the buying was being done by us (lowly) RETAIL INVESTORS, while the INSTITUTIONAL INVESTORS (aka "the Smart Money") have been net sellers.

Seb, we are ALL very familiar with this Smart Money (and the "experts" standing behind it): these were the people who were ALL SURPRISED IN THE CRASH OF '08.



So when Forbes magazine tells us that the Smart Money has been FLEEING bullion, it's pretty hard to imagine a better/stronger reason for us to KEEP BUYING...

Seb1 wrote:
OK Jeff, if you say so. I'm hoping your $3000.00 prediction for end of 2012 will be correct.

P.S. As I pointed out back when I tossed out that round number people don't make "predictions" any longer about the price of gold (or sillver) - they only make guesses.

Maybe the price of gold will be $2000 at the end of this year, maybe it will be $5000. Either way, those are just nominal numbers which don't mean much (other than the bankers' paper is still ridiculously overvalued).

However, as I said earlier, we ALL have another choice here: we can do what the bankers WANT us to do and dump all of our gold and silver. If heeding the advice of a Wall Street banker helps you sleep better then GO FOR IT!!!